Standard Chartered Bank (Thai) forecasts the baht will weaken to around 35 per greenback by mid-2025, driven by escalating trade tensions.
According to Tim Leelahaphan, the bank's vice-president and economist, increased tensions between the US and China, along with trade disputes with other global partners, are expected to be a key factor driving the baht's depreciation to around 35 per US dollar in the second quarter of 2025.
However, the currency is forecast to rebound to 34.50 by year-end, noted Mr Tim.
Additionally, the baht is projected to experience the highest volatility compared to its regional counterparts throughout the year.
Beyond the trade war, factors such as fluctuating gold prices and Thailand's tourism sector will also contribute to this volatility, Mr Tim said.
In 2024, the baht started the year at around 34 to the US unit, then weakened to around 38 in August before strengthening to around 32, largely due to domestic political factors. By the end of the year, the baht returned to around 34 to the dollar.
Mr Tim also noted that the bank expects the Bank of Thailand's Monetary Policy Committee (MPC) to maintain its policy rate at 2.25% at its meeting tomorrow.
This decision is based on ongoing economic recovery and low prices, which support a neutral stance. The committee is also likely to assess the risks from the trade war and the conditions of the domestic economy.
"We see an 80% chance that the central bank will hold its policy rate steady at the current level during Wednesday's meeting, and continue to do so at the April meeting. The central bank is expected to cut the policy rate by 0.25 percentage points to 2% in June," he said.
Mr Tim added that the central bank will likely preserve its policy space to handle the increasing uncertainties, especially as US trade policy developments are expected to become clearer in the second quarter of this year.
Meanwhile, he said the US Federal Reserve is expected to delay its policy rate cut from previous forecasts. Standard Chartered projects GDP growth for 2025 at 2.8%, driven primarily by tourism and domestic consumption.
According to Mr Tim, tourism has seen a strong recovery, with foreign arrivals reaching 3.97 million as of Feb 2, matching pre-pandemic levels in 2019. The sector is expected to continue improving in the second half of the year.
Additionally, the third phase of the government's digital wallet scheme, with a budget of 140 billion baht (about 1% of GDP), is scheduled to be rolled out in the second quarter and is expected to support private consumption, he noted.
However, Mr Tim said the Thai economy may face heightened uncertainty in the second quarter, particularly due to US trade policies, with additional risks potentially emerging in the latter half of the year.
